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Adidas Favors Outside Track

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The decision by underperforming Adidas to bring in an outsider, former Henkel boss Kasper Rorsted, as its new CEO, has been hailed universally as a shrewd move by the iconic German sportswear maker as it seeks to close the gap with US rival Nike.

CEOs hired from an outside industry naturally bring new ways of looking at the business they are entering, says Scott Simmons, managing director of executive recruiter Crist Kolder Associates, citing General Motors’ hiring of former AT&T chairman Ed Whitacre as a success story.

“When business ideas, both strategic and tactical, are born from an insular culture, it can lead to groupthink; and groupthink can be highly detrimental to a bottom line. This is why companies strive so much for diversity,” Simmons says. “We hear this in regard to boardroom makeup on down the organization ranks. While this can refer to ethnic and gender diversity, it can also refer to a diversity of experiences, skills and thought. This new perspective can be very healthy for an organization.”

Yes, there are also pitfalls, Simmons cautions, as an outsider will not have inherent knowledge of customers, investors, regulators and other concerned parties. The industry outsider will be met with a level of skepticism by the rank and file and by external observers. Newcomers need to prove themselves through action and performance, and history shows they don’t always work out. “I would point to Bob Nardelli at Home Depot as a failed attempt at bringing in an industry outsider as CEO,” says Simmons. A former executive at General Electric, Nardelli went on to become chairman of Chrysler.

The ability of an outsider to ask “dumb” questions can disrupt groupthink and spark debate and creativity, because the outsider is not programmed by the industry and brings a unique perspective and unique ways at looking at the business, Simmons says. “For a company like Adidas, which has been underperforming, an outsider’s view could be valuable. Rorsted still has to lead and execute to turn the Adidas ship around; success won’t come simply because he’s from outside the industry.”

In the end, however, concludes Simmons, “good leadership is good leadership, and the basic tenets of business say that success is measured by performance. Rorsted’s performance as CEO of Henkel was exceptional.”